According to the Census Bureau ADVANCE MONTHLY SALES FOR RETAIL AND FOOD SERVICES:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for August, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $377.6 billion, an increase of 0.3 percent (±0.7%)* from the previous month and 3.7 percent (±0.8%) above August 2006. Total sales for the June through August 2007 period were up 3.8 percent (±0.5%) from the same period a year ago. The June to July 2007 percent change was revised from 0.3 percent (± 0.7%)* to 0.5 percent (± 0.2%).

The 3.7% year/year gain is an improvement from 3.2% in July. Still, looking at the longer-term trend it is too early to call an improvement. Furthermore, with CPI running 2.4% year/year the real retail growth is still pretty light.

I’m sticking to my previous characterization: Good but deteriorating.

EconomicData

With back-to-school season upon us but little time to shop, we stock market nerds can get a heads-up on the latest fashions and trends simply by reviewing a few choice conference calls.

Consider, for example, American Eagle Outfitters (AEOS).

During the second quarter, our men’s business was strong, delivering a high single digit comp increase. Strength was broad-based across most major categories, including men’s shorts, knit-tops, and woven shirts. Our overall women’s comp declined slightly with strength in aerie, bare knit-tops, shorts, and dresses offset by declines in graphic tees and polos, skirts, and accessories….

We are now in the midst of the back-to-school season and are pleased with the customer response to our collection. Our new line of women’s knit tanks and tees is a major step forward from spring and summer and a better reflection of what on trend means for our customer.

We are also seeing ongoing momentum in denim. Building on our strong jeans business, this season we took our offering to a new level with a significant amount of fashion newness in our blue issue collection and within our fit systems. Both guys and girls are embracing new fits and responding positively to fashion elements.

(Excerpt from full AEOS conference call transcript)

Abercrombie and Fitch (ANF) saw some of the same trends.

the shorts business was very strong for the quarter, and I can also tell you that the trend in denim improved over the course of the quarter.

Now, what that means go forward, we really can’t comment on and again, overlaying that, our tops business has continued to be very strong across all categories — fashion knits, fleece, just continued to be very strong but I don’t want to get into commenting about the back half of the business.

(Excerpt from full ANF conference call transcript)

Footlocker (FL) comments on the shoe business.

There were also a number of external factors that contributed to our disappointing second quarter results, including the summer fashion trend of sandals, slides and flip flops, a continuing fashion shift to brown shoes, lack of newness in the athletic category, the back to school shift from July to August in certain important states like Florida and Texas. And while steps that we took in June and July adversely impacted our profits for the second quarter, our cash flow was strong, and I believe positions our business better for the back half of this year.

From a merchandising standpoint, the story for the quarter was mostly about clearance. With that said, the marquee category led by brand Jordan, Shox Running, some Nike Max Air products, Adidas Bounce, New Balance Zip and the high-end of ASICS continues to be a very important part of our business.

(Excerpt from full FL conference call transcript)

Finally, you’ve got to have some fun during back to school season. According to GameStop (GME):

The incredible acceptance of the Wii and DS Lite platforms, coupled with the emergence of what could almost be considered a new category – non-game games such as Guitar Hero, SingStar, Boogie, et cetera — has not only attracted more customers, but we are seeing an increasing number of young girls and women in our demographic as well.

(Excerpt from full GME conference call transcript)

So there you have it. The two-minute update on the latest fashions, courtesy of SEC Fair Disclosure regulations.

With the consumer high on everyone’s mind, I thought it a good time to take a look at some companies exposed to discretionary spending to see what they are saying.

Estee Lauder’s (EL) three percent growth in North America was in line with the total retail sales growth recently reported. A big question is whether they are in the wrong place at the wrong time.

Although our most rapid growth will come from overseas, we are taking action to improve in the largest individual market, the U.S. However, we expect progress to be slow because of continued softness in department stores. We anticipate that the tough retail climate in department stores will last for at least the first half of your fiscal year. However, we remain committed to the channel. Department stores have unique offerings of designers and brands, and we firmly believe they will remain the cornerstone of U.S. prestige distribution.

That said, we also note that we now generate approximately 34% of our net sales in North American prestige department stores down from 46% five years ago.

(Excerpt from full EL conference call transcript)

Starbucks (SBUX) grew significantly faster than the average retailer, but not nearly so fast as its investors have come to expect.

Company-operated U.S. retail revenue growth of 19% was driven by the opening of 1,116 new company-operated stores in the last 12 months. During the third quarter specifically, we opened 285 new company-operated locations.

Turning to comparable store sales growth for the U.S. segment, the third quarter saw trends similar to those in the second quarter. The average value per transaction increased 3% while traffic grew less than 1%, resulting in a 4% comparable store sales growth. During the quarter, sales of our core handcrafted espresso-based beverages and premium food offerings were the primary drivers of the growth in same-store sales.

(Excerpt from full SBUX conference call transcript)

The 3% per-transaction growth, again, was just average for US retail. What is still somewhat impressive is growing store traffic at all (even just 1%) while opening new stores at the rate of 3 or 4 per day. Still, they are noticing some shifts in their customer’s habits.

It’s clear that there is an increased competitive environment. There is an increased pressure on consumers from macroeconomic factors. But in all of those areas, we believe that we have a competitive advantage of being the coffee experts and being able to generate incremental traffic as we go forward, particularly in our core beverages, our core espresso beverages and the things that are uniquely Starbucks.

(Excerpt from full SBUX conference call transcript)

The credit crunch is hitting Nordstrom (JWN).

Approximately $14 million of the bad debt reserve is non-comparable due to the previous mentioned accounting treatment for our co-branded Visa receivables that did not occur in the prior year. The remaining $8 million of the incremental provision resulted from growth in both the Visa and proprietary card receivables ahead of plan and from changes to assumed repayment rates versus last year.

These changes stem from observed increases in early stage delinquencies.

(Excerpt from full JWN conference call transcript)

However, the company expects to gain market share.

Our same-store sales expectation is now 5% to 6% for the year, up from 3% to 4% based on our year-to-date performance combined with our plans for the remaining two quarters of the year.

(Excerpt from full JWN conference call transcript)

I think the general consensus is that consumers are feeling some pressure but not enough to really keep them from spending. These conference calls seem to confirm that consensus opinion.

Disclosure: Author is long Starbucks (SBUX) at time of publication.

Presented at the Carnival of Economics and Global Trade:

Yesterday I noted that, at least for the companies I watch, retail sales didn’t look so hot. With the official statistics now out, it appears it wasn’t limited to my stocks of interest.

Econoday Report: Retail Sales 13, 2007

Year-on-year, overall retail sales in June fell to up 3.8 percent from up 5.1 percent in the month before. Excluding motor vehicles, May’s year-on-year sales declined to up 4.2 percent, compared to up 4.9 percent in May. Excluding motor vehicles and gas station sales, year-on-year sales in June fell to up 4.6 percent from up 5.0 percent the prior month.

With the monthly data now in, I won’t track the weekly changes in my economic data table. As for the retail sales figure, they are still holding fairly strong so I am classifying it as “good but deteriorating.”

EconomicData

Retail sales reports are out today, and for my Watch List companies they don’t look so hot.

Small Cap Watch List (Track at Marketocracy) member Big Five Sporting Goods (BGFV):

For the fiscal 2007 second quarter, net sales increased $6.0 million, or 2.9%, to $217.8 million from net sales of $211.8 million for the second quarter of fiscal 2006. Same store sales declined 0.2% for the fiscal 2007 second quarter, representing the Company’s first quarterly decrease in same store sales in over eleven years. The Company now expects earnings per diluted share for the fiscal 2007 second quarter to be in the range of $0.23 to $0.26, compared to previously issued earnings guidance of $0.25 to $0.33 per diluted share.

Mid Cap Watch List (Track at Marketocracy) member Abercrombie & Fitch (ANF) was slow, but at least improved from the dismal performance of recent months:

June comparable store sales increased 2% for the five-week period ended July 7, 2007, compared to the five-week period ended July 8, 2006.

Other signs are pointing to the consumer slowdown extending beyond just housing-related stores. The consumer was the last leg in the economy’s stool, so businesses had better take up the slack or we could be in for more of a slowdown than we already have.

Small Cap Watch List (Track at Marketocracy) member Aeropostale (ARO), a mall-based teen apparel retailer, announced that total net sales for the five-week period ended July 7, 2007 increased 5.3% to $111.4 million, from $105.8 million for the five-week period ended July 1, 2006. Same store sales for the month increased 0.2%, compared to the corresponding five-week period ended July 8, 2006.

It doesn’t take much to see that sales are slowing. Year-to-date, total net sales increased 11.6% to $475.3 million, from $426.0 million in the year-ago period. Year-to-date, same store sales increased 1.9%, compared to the corresponding period ended June 3, 2006. In May same store sales were up 1.9%, and the average for March and April (both of which were skewed by the early Easter) was 2.9%.

Nonetheless, the company announced a 3:2 stock split, effective August 6.

With the end of the first quarter approaching, it is time to adjust the names in my Watch Lists. I will price all the new lists as of the close on Friday, June 29.

Today I present my planned updates to the Small Cap Watch List. There was a fairly high level of turnover to the list. 12 of the 24 names from the previous run made it to the current list, which was also 24 names. Performance-wise, the list created in March has returned an unweighted average return of 2.6% through June 28, with 80% of the stocks in positive territory. All of the money-losers from the previous list fell out of consideration.
So without further ado, the names on the chopping block from the previous list are: PW Eagle (PWEI), Insteel Industries (IIIN), Allied Defense (ADG - Annual Report), Hartmarx (HMX), Parlux (PARL), Hansen Natural (HANS), FirstFed Financial (FED), Young Innovations (YDNT), ITT Educational (ESI), Rent-a-Center (RCII), Valassis (VCI), and Travelzoo (TZOO). The castaways include four of the five money losers from the previous portfolio (HMX, PARL, YDNT and TZOO) as well as the biggest gainer (ESI).
The new list is:

I will continue to track both lists on StockPickr.

Mid Cap Watch List (Track at Marketocracy) and Large Cap Watch List (Track at Marketocracy) member Abercrombie & Fitch (ANF) reported net sales of $215.0 million for the four-week period ended June 2, 2007, a 16% increase over net sales of $185.7 million for the four-week period ended May 27, 2006. May comparable store sales decreased 5% for the four-week period ended June 2, 2007, compared to the four-week period ended June 3, 2006. Those results mark a slowdown from the 4% same store sales decline last month.

The Cato Corporation (CTR) reported sales of $75.9 million for the four weeks ended June 2, 2007, a 3% increase over sales of $73.8 million for the four weeks ended May 27, 2006. Comparable store sales for the month increased 2%, which is more or less in line with the results over the last two months.

These results join those of Small Cap Watch List (Track at Marketocracy) member Aeropostale (ARO) to offer modest support to a continued consumer slowdown.

Small Cap Watch List (Track at Marketocracy) member Aeropostale, Inc. (ARO) announced that total net sales for the four-week period ended June 2, 2007 increased 19.3% to $88.1 million, from $73.9 million for the four-week period ended May 27, 2006. Same store sales for the month increased 1.9%, compared to the corresponding four-week period ended June 3, 2006.

The same store sales figure represents a slowdown from the 2.9% March-April average (both of which months were affected by the early Easter) and the 2.4% year-to-date figure.

Granted, a single mall-based teen retailer does not necessarily represent what is happening in the broader economy. But if the coming same-store sales numbers at other retailers follow suit, it has bad implications for the last remaining leg holding up the GDP stool.

Mid Cap Watch List (Track at Marketocracy) and Large Cap Watch List (Track at Marketocracy) member Abercrombie & Fitch Co. (ANF) reported unaudited results which reflected record first quarter net income of $60.1 million and net income per diluted share of $0.65 for the thirteen weeks ended May 5, 2007.

Analysts had been expecting the company to earn $0.65 after the company recently preannounced. For the second time. Sales managed to rise 13% overall to $742 million despite a 4% decline at stores open more than one year. The sales number also failed to meet consensus estimates. Still, shares were up following the report on hopes that the worst of the same-store sales declines are past:

The Company reaffirmed its previously disclosed earnings guidance which stated it expects net income per diluted share for the first-half of Fiscal 2007 to be in the range of $1.47 to $1.52, representing between 10% to 13%
earnings growth over the first half of Fiscal 2006. The low end of the guidance reflects a flat comparable store sales scenario for the second quarter of Fiscal 2007.

The guidance implies second quarter EPS of $0.82 - $0.87, and analysts were at the low end of that range with $0.83. The key will be whether the company can finally live up to its early forecasts.